ABSTRACT
This chapter discusses the nature of profit, in particular the problems that arise in a period of rising prices. Various alternative approaches to profit measurement are explored, together with their underlying concept of capital maintenance. In the course of this exploration the chapter examines the two main proposals for dealing with the effect of changing prices in financial reports. The greater awareness of the measurement issues, and the differentiation between income and other gains, should enable the development of a better understanding of financial position and performance.
